Oil Ministry intervenes at the eleventh hour after fuel dealers threaten to decline card payments due to imposition of transaction charges by banks; decision deferred till January 13 to hold consultative meetings between all stakeholders
Capping a day of intense confusion after petroleum dealers threatened to decline card payments, the government intervened and asked banks to defer the imposition of merchant transaction charges till January 13. Earlier, the banks had proposed to levy Merchant Discount Rates (MDR) on all card transactions at fuel stations starting Sunday midnight, causing panic among dealers. A final call would be taken after consultative meetings between banks, dealers and oil marketing companies. Interestingly, petroleum dealers did not have to pay MDR before demonetisation.
The decision to impose MDR pushed all three oil marketing majors to write to the banks to defer the move. “Considering the thrust given by the government for cashless transactions, imposition of MDR on fuel transactions will be a retrograde step,” said a BPCL communique. The move, if implemented, would have resulted in dealers recording major losses on cashless transactions, said the Consortium of Indian Petroleum Dealers and the Tamil Nadu Petroleum Dealers Association.
“Our net profit margin is only 0.5 per cent. We just cannot absorb MDR without slipping into losses,” pointed out M Narayana Prasad, general secretary, CIPD. Nearly 40-50 per cent of all transactions at petrol pumps in Tamil Nadu are done through cards, says KP Murali, president of TNPDA. The situation is likely to be the same across the country, he adds.
“They were asking us to take losses on card transactions. We have supported the government’s policy of pushing digital transactions and were one of the first sectors to boost digital transactions. After demonetisation, we also went through immense hardships. When something like this happens now, we feel betrayed,” he said.
However, he added that if dealers were not satisfied with the outcome of the meetings, they would go ahead with their plan to decline plastic money. The earlier announcement had also caused panic among consumers who are yet to recover from the cash crunch. “Already there is a cash crunch and we have been surviving on plastic money. Now, where do we go for cash for fuel? Being an initiative of the government, it should ensure that we don’t suffer,” says Nitin Krishna, an IT employee.
The return of the MDR could have a severe impact on spending across sectors, which has already taken a beating after demonetisation, and put further pressure on liquidity, say to experts like economist Seema Sharma from IIT-Delhi.